Marriott Vacations Worldwide Reports Fourth Quarter and Full Year 2015 Financial Results and 2016 Outlook

ORLANDO, Fla., Feb. 25, 2016 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported fourth quarter and full year 2015 financial results and provided its outlook for the full year 2016.

"2015 was a solid year for Marriott Vacations Worldwide, as we delivered nearly $236 million of adjusted EBITDA and nearly $229 million of adjusted free cash flow, and returned over $225 million of capital to our shareholders," said Stephen P. Weisz, president and chief executive officer. "We continue to execute against our growth strategy by adding new destinations that provide on-site sales distributions and growing our tour pipeline.  With the recent announcements of our new New York City and Miami Beach locations, we are targeting to open six new sales centers during 2016.  We are excited about the future for our company and are targeting meaningful adjusted EBITDA growth and adjusted free cash flow in 2016."

Fourth quarter 2015 highlights:

• Adjusted EBITDA totaled $69.0 million, an increase of $20.3 million, or 41.8 percent, year-over-year, with growth coming from all lines of business.
• Adjusted fully diluted earnings per share (EPS) was $1.11, up over 60 percent from $0.69 in the fourth quarter of 2014.
• North America contract sales, excluding residential sales, were $182.0 million, down 2.0 percent year-over-year.  Excluding contract sales from the company's Latin American sales channels, North America contract sales were $169.8 million, up 1.4 percent over the fourth quarter of 2014.
• During the fourth quarter of 2015, the company repurchased nearly 1.6 million shares of its common stock for approximately $95.3 million. 
• Subsequent to the end of the fourth quarter, the company entered into a capital efficient transaction with a third party to purchase the 176-room The Strand Hotel in New York City in phases over time, beginning in 2018.  The company also completed the acquisition of The Edgewater Hotel, a 49-room operating hotel located in Miami.  The company intends to sell inventory from these properties as part of its North America points program.

Fourth quarter 2015 net income was $33.1 million, or $1.06 diluted EPS, compared to net income of $0.5 million, or $0.01 diluted EPS, in the fourth quarter of 2014.

Full year 2015 highlights:

• Adjusted EBITDA totaled $235.9 million, above the high end of the company's guidance range of $222 million to $232 million.  Results reflected an increase of $36.2 million, or 18.1 percent, year-over-year.
• The company generated adjusted free cash flow of $228.9 million, exceeding its $175 million to $200 million guidance range.  Results exclude the company's decision to accelerate the payment of $66 million of its pre-spin Marriott Rewards liability that was due in February of 2016 for points issued prior to the spin-off.
• The company repurchased nearly 2.9 million shares of its common stock at an average price of $70.48 per share for a total of $201.4 million.  Including dividends paid during the year, the company returned a total of $225.2 million to its shareholders in 2015. 
• North America adjusted development margin percentage was 22.9 percent.  Company adjusted development margin percentage was 20.9 percent, slightly below the company's guidance that results would be towards the lower end of its 21 percent to 22 percent range.
• North America VPG totaled $3,386, in line with 2014; tours increased 2.5 percent year-over-year.
• Adjusted fully diluted EPS increased 26.3 percent to $3.70 compared to $2.93 in 2014, higher than the company's $3.33 to $3.52 guidance range.

Full year 2015 net income totaled $122.8 million, or $3.82 diluted earnings per share, compared to reported net income of $80.8 million in 2014, or $2.33 diluted earnings per share. North America development margin percentage was 22.9 percent in 2015 compared to 23.4 percent in the prior year. Company development margin percentage in 2015 was 20.8 percent compared to 20.9 percent in 2014. Net cash provided by operating activities was $109.0 million for 2015.

Non-GAAP financial measures, such as adjusted EBITDA, adjusted net income, adjusted earnings per share, adjusted development margin and adjusted free cash flow are reconciled and adjustments are shown and described in further detail on pages A-1 through A-20 of the Financial Schedules that follow.

2016 Outlook:

To facilitate comparisons with the company's competitors and to eliminate the variability among companies in reporting compensation expense, beginning in the first quarter of 2016, adjusted EBITDA will exclude all non-cash share-based compensation expense which was approximately $14 million in 2015 and is expected to be slightly higher in 2016.  The company's outlook for 2016 reflects this adjustment.

• Adjusted EBITDA of $261 million to $276 million
• Adjusted fully diluted EPS of $4.23 to $4.56
• Adjusted Net Income of $126 million to $136 million
• Company contract sales growth (excluding residential) of 4 percent to 8 percent
• Adjusted free cash flow of $135 million to $155 million

The non-GAAP financial measures set forth above are reconciled on pages A-1 through A-20 of the Financial Schedules to the following full year 2016 expected GAAP results: net income of $124 million to $134 million; fully diluted EPS of $4.16 to $4.50; and net cash provided by operating activities of $129 million to $142 million.

Fourth Quarter 2015 Results

Company Results

Total company contract sales, excluding residential sales, were $204.2 million, $7.4 million lower than the fourth quarter of last year. The decrease was driven by $3.7 million of lower contract sales in the company's North America segment, $2.1 million of lower contract sales in the company's Europe segment and $1.6 million of lower contract sales in the company's Asia Pacific segment.

Adjusted development margin was $38.1 million, a $5.2 million decrease from the fourth quarter of 2014. Adjusted development margin percentage was 20.1 percent in the fourth quarter of 2015 compared to 21.4 percent in the fourth quarter of 2014. Development margin was $44.0 million, a $5.4 million increase from the fourth quarter of 2014, reflecting the turnaround of unfavorable revenue reportability from the third quarter of 2015. Development margin percentage was 22.1 percent in the fourth quarter of 2015 compared to 19.8 percent in the fourth quarter of 2014.

Excluding the results of operations for the portion of the Surfers Paradise, Australia hotel that the Company intends to sell, adjusted rental revenues totaled $83.5 million, a $10.2 million increase from the fourth quarter of 2014, reflecting a 4 percent increase in transient rate, a 2 percent increase in transient keys rented, $4.4 million from revenue associated with operating hotels prior to conversion to timeshare, and $0.8 million of higher plus points revenue. Adjusted rental revenues, net of expenses, were $13.6 million, an $11.8 million increase from the fourth quarter of 2014, of which $5.9 million relates to lower costs year-over-year associated with the company's pre-spin Marriott Rewards liability.  Rental revenues net of expenses were $12.9 million, an $11.1 million increase from the fourth quarter of 2014.

Excluding the results of operations for the portion of the Surfers Paradise, Australia hotel that the Company intends to sell, adjusted resort management and other services revenues totaled $95.0 million, a $6.1 million increase from the fourth quarter of 2014. Adjusted resort management and other services revenues, net of expenses, were $34.4 million, a $3.7 million increase over the fourth quarter of 2014.  Resort management and other services revenues net of expenses totaled $35.3 million, a $4.6 million increase from the fourth quarter of 2014.

Financing revenues totaled $38.4 million, a $0.5 million decrease from the fourth quarter of 2014. Financing revenues, net of expenses and consumer financing interest expense, were $22.6 million, a $0.3 million increase from the fourth quarter of 2014.

Adjusted EBITDA was $69.0 million in the fourth quarter of 2015, a $20.3 million, or 41.8 percent, increase from $48.7 million in the fourth quarter of 2014.

Segment Results

North America

North America contract sales, excluding residential sales, were $182.0 million in the fourth quarter of 2015, a decrease of $3.7 million, or 2.0 percent, from the prior year period, driven by a stronger U.S. dollar that negatively impacted sales channels to Latin American customers by over $6.1 million year-over-year.  Excluding contract sales from the company's Latin American channels, North America contract sales were $169.8 million, up 1.4 percent.

Tours increased 4.5 percent year-over-year.  VPG decreased 2.9 percent to $3,162 in the fourth quarter of 2015 from $3,255 in the fourth quarter of 2014, driven by lower closing efficiency offset partially by higher pricing. 

Fourth quarter 2015 North America segment financial results were $121.8 million, an increase of $38.5 million from the fourth quarter of 2014. The increase was driven primarily by a $23.8 million non-cash charge in the prior year fourth quarter related to the disposition of partially developed land, an operating golf course, spa and clubhouse and related facilities at the company's former resort in Abaco, Bahamas and settlement of related litigation, $10.8 million of higher rental revenues net of expenses, $4.9 million of higher development margin, and $3.4 million of higher resort management and other services revenues net of expenses, partially offset by $3.5 million of gains in the prior year fourth quarter related primarily to the disposition of undeveloped and partially developed land, an operating golf course and related assets in Kauai, Hawaii.

Adjusted development margin was $37.4 million, a $4.6 million decrease from the prior year quarter. Adjusted development margin percentage was 22.1 percent in the fourth quarter of 2015 compared to 23.5 percent in the fourth quarter of 2014. Development margin was $44.1 million, a $4.9 million increase from the fourth quarter of 2014. Development margin percentage was 24.5 percent in the fourth quarter of 2015 compared to 22.6 percent in the prior year quarter.

Asia Pacific

Total contract sales in the segment were $10.6 million, a decrease of $1.6 million in the fourth quarter of 2015.  Excluding the results of operations for the portion of the Surfers Paradise, Australia hotel that the Company intends to sell, adjusted segment financial results were $2.0 million, a $1.8 million decrease from the fourth quarter of 2014.  Results reflected $2.3 million of lower development margin from lower contract sales and higher marketing and sales costs and $0.4 million of lower adjusted resort management and other services revenues net of expenses, partially offset by $0.9 million of higher adjusted rental revenues net of expenses associated with the portion of the Surfers Paradise, Australia hotel that the company plans to convert into vacation ownership interests for future use.

Europe

Fourth quarter 2015 contract sales were $11.6 million, a decrease of $2.1 million from the fourth quarter of 2014. Segment financial results were $4.7 million, a $2.9 million increase from the fourth quarter of 2014 due to higher development margin from favorable revenue reportability year-over-year and higher resort management and other services revenues net of expenses.

Full Year 2015 Results

For the full year, total company contract sales, excluding residential sales, were $699.9 million, up $1.1 million, or 0.2 percent, from $698.8 million in 2014, driven by $11.7 million of higher contract sales in the company's North America segment, and $0.2 million of higher contract sales in the company's Asia Pacific segment. These increases were partially offset by $10.8 million of lower contract sales in the company's Europe segment. 

North America contract sales, excluding residential sales, were $631.4 million, 1.9 percent higher than 2014.  Excluding contract sales in the company's Latin American channels, North America contract sales were $585.0 million, up $24.9 million, or 4.4 percent, from 2014.  Full year 2015 total company adjusted development margin decreased to 20.9 percent in 2015 from 22.0 percent in 2014.

Adjusted EBITDA in 2015 totaled $235.9 million, $36.2 million, or 18.1 percent, higher than 2014. Full year 2015 adjusted free cash flow was $228.9 million. Adjusted net income in 2015 totaled $118.9 million, an increase of $17.4 million over 2014. Full year 2015 adjusted fully diluted EPS was $3.70, $0.77 higher than 2014.

Share Repurchase Program

During the fourth quarter of 2015, the company repurchased 1.6 million shares of its common stock for a total of nearly $95.3 million under its share repurchase program. In total, the company returned $225.2 million to its shareholders during 2015, through the repurchase of nearly 2.9 million shares for $201.4 million and $23.8 million in dividends paid. Subsequent to the end of 2015, through February 24, 2016, the company repurchased 0.9 million shares for over $45 million.    

On February 11, 2016, the Board of Directors authorized the company to repurchase up to 2.0 million additional shares of its common stock under its share repurchase program.  Combined with the shares not yet purchased under its previous authorization, the company is authorized to purchase approximately 3.1 million additional shares.

Balance Sheet and Liquidity

On January 1, 2016, cash and cash equivalents totaled $177.1 million. Since the beginning of the year, real estate inventory balances declined $104.3 million to $663.9 million, including $332.9 million of finished goods and $331.0 million of land and infrastructure. The company had $688.1 million in gross debt outstanding at the end of 2015, a decrease of $23.2 million from year-end 2014, consisting primarily of $684.6 million in gross non-recourse securitized notes. In addition, $40.0 million of gross mandatorily redeemable preferred stock of a subsidiary of the company was outstanding at the end of 2015.

As of January 1, 2016, the company had approximately $196.7 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit and approximately $110 million of gross vacation ownership notes receivable eligible for securitization in its warehouse credit facility.

Fourth Quarter 2015 Earnings Conference Call

The company will hold a conference call at 10:00 a.m. EST today to discuss these results and the guidance for full year 2016. Participants may access the call by dialing (877) 407-8289 or (201) 689-8341 for international callers. A live webcast of the call will also be available in the Investor Relations section of the company's website at www.marriottvacationsworldwide.com.

An audio replay of the conference call will be available for seven days and can be accessed at (877) 660-6853 or (201) 612-7415 for international callers. The conference ID for the recording is 13628123. The webcast will also be available on the company's website.

About Marriott Vacations Worldwide Corporation

Marriott Vacations Worldwide Corporation is a leading global pure-play vacation ownership company, offering a diverse portfolio of quality products, programs and management expertise with 63 resorts. Its brands include Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott. Since entering the industry in 1984 as part of Marriott International, Inc., the company earned its position as a leader and innovator in vacation ownership products. The company preserves high standards of excellence in serving its customers, investors and associates while maintaining a long-term relationship with Marriott International. For more information, please visit www.marriottvacationsworldwide.com.

Note on forward-looking statements: This press release and accompanying schedules contain "forward-looking statements" within the meaning of federal securities laws, including statements about future operating results, estimates, and assumptions, and similar statements concerning anticipated future events and expectations that are not historical facts. The company cautions you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including volatility in the economy and the credit markets, supply and demand changes for vacation ownership and residential products, competitive conditions, the availability of capital to finance growth, and other matters referred to under the heading "Risk Factors" contained in the company's most recent Annual Report on Form 10-K filed with the U.S Securities and Exchange Commission (the "SEC") and in subsequent SEC filings, any of which could cause actual results to differ materially from those expressed in or implied in this press release. These statements are made as of February 25, 2016 and the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Financial Schedules Follow